China Moves to Enhance Aid Transparency

In most industrialized nations, international development assistance is overseen by the foreign affairs ministry. Not so in China: Its Department of Aid to Foreign Countries is part of the Ministry of Commerce. China is known for approaching foreign aid as a strategic investment allowing the country to send Chinese workers around the globe to build roads and factories, often in exchange for natural resource or other favors. The way the country defines and calculates international assistance differs from other industrialized nations, especially members of the Organization for Economic Cooperation and Development. While China considers financial support of joint ventures a form of assistance, OECD members do not, for instance. If an OECD country or the World Bank gives a loan, the full amount counts as aid even if it has to be repaid. For China, only interest rate subsidies of concessional loans count as aid because they constitute expenditures, said Deborah Brautigam, the author of “The Dragon’s Gift: The Real Story of China in Africa.” “Looking at the concessional loans coming from the World Bank, if you just look at the gross amount coming out it is much larger, but most of that has to be repaid, so the World Bank’s actual aid is much smaller than it appears,” said Brautigam, a professor at the American University’s School of International Service. Why the divergence? Most industrialized nations accept OECD rules on foreign aid and export credits, said Brautigam. China, however, is no OECD member, according to Brautigam. “If we had decided to use the United Nations as the forum of setting the rules about aid, then we wouldn’t be in this situation,” she said. “China is not a member of the OECD, so why should they follow the rules set by the OECD?” Many emerging and aid-recipient nations “have always had a kind of resentment” toward OECD for setting such rules, Brautigam said, noting a push by some developing countries for a different forum where they would gain more voice on this issue. The U.N. is one possible venue “because they see that as more of a level playing field,” she added. “When you look at it from their perspective, why should all the rules be defined in Paris, by a club of the rich?” she asked, referring to OECD’s headquarters in the French capital. “I think the OECD rules are basically good rules, but a lot of countries feel that these things are being imposed by the West.” Chinese aid volume China’s aid – if taken as the sum of development grants, concessional loans, state-sponsored and subsidized investments – is impressive, according to a February 2009 report of the U.S. Congressional Research Service, which is based on a survey by the Robert F. Wagner Graduate School of Public Service at New York University. But the figure can only be estimated. According to the survey, China provides between $1.4 billion and $2.7 billion per year to Africa. World Bank and Chinese government estimates, the report notes, indicate that infrastructure financing had reached $7 billion and economic cooperation had grown to $9.5 billion in 2006. China’s government publishes overseas aid expenditures on an aggregate basis, Brautigam said. Per-region and per-country data are not made available. Enhancing aid transparency The lack of detailed information on its aid program has gained China some critics. But according to a European Union officer who is working on the implementation of the trilateral dialogue EU-China-Africa, there are clear signs of China’s stronger commitment to making its aid more transparent. Citing a pronouncement by the Ministry of Commerce’s research institute during a Beijing conference last year, the EU officer said the Chinese government plans to produce its first annual report on China-Africa relations, including trade and aid. “Until we … see [it], we don’t know how comprehensive it will be,” he said. “But the fact the Chinese authorities decided to publish an annual report, it is a good sign in itself.” For Brautigam, China has always been transparent with its development cooperation “to the government that’s getting it” as the bilateral agreements China pursues specify the terms, value and purpose of assistance. What is changing, she said, is the degree of openness by Chinese embassies. “They didn’t use to talk about the actual amount very much, but I’ve seen a lot of change,” she added. “But that’s still informal. They are not collecting it together and publishing it somewhere. But there is a change in terms of transparency.” Read more: - CHINA’S FOREIGN AID STRATEGY PART 1: Western Donors Embrace China for African Development - CHINA’S FOREIGN AID STRATEGY PART 2: China’s ‘Noninterference’ Approach to International Cooperation - CHINA’S FOREIGN AID STRATEGY PART 4: In Africa, China Expands Aid Priorities - CHINA’S FOREIGN AID STRATEGY PART 5: Partnership Opportunities in Chinese Development Cooperation